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Should I Take a $200,000 Lump Sum or $915 Monthly Payments for a Pension Annuity?


Deciding between taking a lump sum or monthly payments involves assessing a number of factors, including some that are difficult to quantify. The two most important considerations may be when you will receive the lump sum and how long you will live afterward. Getting the lump sum payout sooner increases the lump sum’s value, while living longer and receiving more monthly payments increases the pension annuity option’s value. Important considerations include your planned retirement age, health, investment assumptions, and, finally, your ability to handle a lump sum payout in a disciplined fashion. If you’re presented with a choice between a lump sum payout and monthly annuity payments, consider talking it over with a financial advisor.

Buyout Basics

Today many corporations are offering employees a choice between taking a lump sum payout when they retire or receiving regular monthly payments for life. Deciding what to do with this buyout offer comes down to assessing whether you will get more money by taking the lump sum or by taking the monthly payments.

Your first step will be to gather the facts about the pension, including the monthly payment amount and the age when you become eligible to receive payment.

You’ll also need the amount of the lump sum payout and when you can receive it, as well as your current age and the age you expect to die. This last factor is one of the most important and least predictable, but family history, gender and health status are important factors to consider.

Buyout Decision Examples

Let’s start by assuming your pension is a single life type without surviving spouse benefits or cost-of living adjustments. The $915 monthly payments for life start at age 65. You are 65 now and expect to live 19 more years to age 84, which is the life expectancy Social Security’s calculator assigns to a 65-year-old male. In this situation, the monthly pension benefits total $208,620, slightly more than the $200,000 lump sum.

The outcome is different if instead the $915 payments start at 60 and you are a 60-year-old female. In this case, your life expectancy increases to 26 years and the total of the monthly payments $230,580.

Even though monthly payments total more than the lump sum, that doesn’t necessarily make the lump sum an inferior option. You can invest the lump sum to generate growth or income while also drawing from it to pay expenses. If you invest $200,000 at 4% and withdraw $915 each month, after 19 years you’ll still have $114,361.

Get matched with a fiduciary financial advisor for free to talk about your payout options and how they could affect your retirement. An advisor can help you make calculations based on your own personal circumstances.

Decision Factors

Your health is a key element in this decision. If you have a health condition or family history that suggests you may live a shorter time, that reduces the value of the monthly payout option.

Also think about your ability to handle a large sum prudently. A 2022 MetLife study found that 35% of people who took a lump sum instead of a monthly pension annuity payment had spent the money within five years on average. More than three-quarters of those who took the lump sum made a major purchase such as a luxury vehicle, vacation or new or second home within a year.

The same study also found that nearly all – 96% – of those who took the monthly pension annuity payment were happy that they chose that option. And when pre-retirees were asked what they would choose, a large majority of 82% indicated they favored the monthly payments over the lump sum.

Consider taking the time to speak with a financial advisor to make the decision that will maximize your chances of the most money in retirement.

Bottom Line

Deciding between taking a lump sum or regular monthly payments requires evaluating your expected life span as well as how soon you can receive the lump sum. A longer life expectancy tends to favor monthly payments, while the sooner you can get the lump sum, the better that option looks. In addition to these factors, making a good decision may require considering expected investment returns, inflation and, last but not least, your own ability to invest a lump sum instead of spending it.


  • You likely will have to decide between a lump sum or monthly payment once in your life, at most. A financial advisor may have helped many people make similar choices and be able to share their insights with you. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s Investment Return and Growth Calculator to quickly generate an estimate of how much your portfolio will be worth in the future.  

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